ITAT Deletes Rs 1.14 Crore Section 68 Addition After Finding Bank Credits Fully Explained:

ITAT Deletes Rs 1.14 Crore Section 68 Addition After Finding Bank Credits Fully Explained The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favour of Vatsal Infraprojects Pvt. Ltd. (now merged with Naymal Realtors Pvt. Ltd.) for Assessment Year 2011-12, deleting an addition of Rs 1,14,96,208 that had been made by the Income Tax Department under Section 68 of the Income-tax Act.

The case arose after the Income Tax Department reopened the company's assessment based on information from the Investigation Wing, which reported that deposits of nearly Rs. 26,99,94,100 had been credited to the company's Yes Bank account during the relevant financial year. The AO asked for an explanation for these transactions and considered Rs 1,14,96,208 as unexplained cash credits. During the assessment proceedings, the company submitted detailed documents explaining the source of the bank credits. It said it is a core investment company that invests in group companies and provided bank statements, financial records and supporting documents for the transactions. The AO accepted the explanation for most of the deposits but continued to treat Rs 1,14,96,208 as unexplained.

Before the Tribunal, the company argued that the remaining amount had also been fully explained. It pointed out that Rs 36 lakh represented repayment of an earlier loan received from Tapasya Hotels and Resorts Ltd. (formerly ACCIL Hospitality), and submitted the lender's audited financial statements, bank records, and assessment orders as evidence. It also produced similar documents relating to ACCIL Corporation to explain another transaction of Rs 80,12,772. The ITAT checked the bank statements and other documents and found that the company’s Yes Bank account had a total Rs 27,47,54,100 credits, including opening balance. Out of this, the AO had already accepted credits of Rs. 26,32,57,892. The Tribunal observed that the balance consisted of the Rs 36 lakh loan repayment, which was fully supported by documentary evidence, and the remaining amount represented the closing bank balance at the end of the financial year. Therefore, no unexplained credit remained in the bank account. Holding that the entire amount deposited in the bank account had been satisfactorily explained, the Tribunal ruled that the addition made under Section 68 was not justified. It directed the Assessing Officer to delete the addition of Rs 1,14,96,208 in full.

Since the issue was decided in favour of the taxpayer on merits, the Tribunal did not examine the other legal grounds raised in the appeal, treating them as academic. Accordingly, the appeal filed by Vatsal Infraprojects Pvt. Ltd. was allowed.